MPC split over demand or supply in growth revival

MPC split over demand or supply in growth revival

Differences over the growth potential, demand and inflation led to a dissent vote in the quantum of interest rate cut in the last Monetary Policy Committee meet as economist Chetan Ghate factors in a quick revival of demand while deputy governor Michael Patra believes it may take `years to repair’ the damage caused by Covid-19.

While there has been unanimity among all the six members of the MPC in the blow to the economy by the lockdown, there are differences in how these members see the economy coming out of the current crisis.

``When the economy turns to the upside, the recovery in demand will be swift,’’ Ghate said in the minutes of the MPC meet on May 22 released by the RBI. ``There has already been a severe dislocation in domestic and global supply chains. It will take some time to for these to get resolved, and it is therefore likely that demand will recover faster than supply.’’

But Janak Raj, executive director at RBI believes that the revival could be in a different way.